Stock Market Gets Lift from Energy Sector after Trump’s Iran Move Boosts Oil
U.S. stocks rose modestly on Wednesday, with energy companies leading the advance as oil prices jumped to a 3 1/2-year high.
The energy gains came as traders digested President Donald Trump’s decision a day earlier to pull the U.S. out of the Iran nuclear deal and resume sanctions against the oil-producing nation. However, uncertainty over the broader fallout to the decision could limit gains.
What are markets doing?
The Dow Jones Industrial Average DJIA rose 37 points, or 0.2%, to 24,399. The S&P 500 SPX gained 6 points to 2,678, a gain of 0.3%. The Nasdaq Composite Index COMP added 10 points, or 0.1%, to 7,277.
Energy shares jumped 1.7%, by far the biggest outperformer among the 11 primary S&P 500 sectors. Material stocks rose 0.6% while industrial names were up 0.4%.
What is driving the market?
A rally in oil prices helped lift U.S.-listed energy companies in premarket action, which pushed stock-index futures higher. West Texas Intermediate oil CLM8 jumped 2.6% while Brent LCON8, was up 2.5%. Trump said the U.S. intends to impose sanctions on Iran, curbing the country’s oil exports and tightening global oil supply.
The jump in oil coincided with a rise in Treasury yields, as rising energy prices can lift inflation expectations, which are bearish for bonds that have a fixed value. Rising inflation also could put pressure on the Federal Reserve to raise interest rates more aggressively. The yield on 10-year U.S. notes TMUBMUSD10Y, +0.60% rose back above 3%. The dollar DXY, -0.05% was higher earlier in the premarket session, but edged lower, off 0.1% at 93.04, as the opening bell approached.
What are strategists saying?
“The [Iran] decision is likely to curb global oil supplies and put upward pressure on oil prices. Iran is OPEC’s third-largest producer, with production fluctuating around 3.8 mbpd [million barrels a day] in recent months and exports of between 2 and 2.5 mbpd,” said Mark Haefele, chief investment officer at UBS, in a note.
Among oil companies on the rise, Exxon Mobil Corp. XOM added 1.8%, Chevron Corp. CVX climbed 2%, and Devon Energy Corp. DVN picked up 2.5%.
Both Boeing Co. BA and General Electric Co. GE could also be volatile following Trump’s decision on Iran. Boeing stands to lose roughly $20 billion in business with the country as a result of the withdrawal, which pledges to punish businesses doing transactions in Iran. GE, which makes aviation parts, could also be impacted. Boeing rose 0.1% in early trading while GE was up 0.9%. Both stocks are Dow components.
Dow component Walt Disney Co. DIS fell 1.4% even after its earnings out late Tuesday beat forecasts. Its results were boosted by performance at its movie-studio arm after the huge success of “Black Panther.”
Walmart Inc. shares WMT fell 3% after the retail giant said it was taking control of India’s largest e-commerce company, Flipkart Group, for $16 billion, as the Bentonville, Ark.-based company tries to fend off Amazon.com Inc. AMZN at home and abroad.
TripAdvisor Inc. TRIP soared 19%. The online travel-booking service late Tuesday released results that topped Wall Street estimates.
Groupon Inc. GRPN jumped 10% after it unexpectedly reported an adjusted profit and revenue that fell less than expected.
Electronic Arts Inc. EA climbed 2.3%, boosted by positive analyst commentary following its quarterly results.
Shares of Monster Beverage Corp. MNST sagged 6.8% a day after it posted earnings below forecasts.
Shares of Papa John’s International Inc. PZZA fell 6.4%. The pizza chain late Tuesday reported a decline in quarterly sales.
U.S.-listed shares of Anheuser-Busch InBev SA BUD rose 1.8% after the European brewer released results.
Shares of ADT Inc. ADT tumbled 10%, a day after the home-security company reported its first-quarter results.
Coty Inc. COTY jumped 3.3% after it reported adjusted third-quarter earnings that topped expectations, along with better-than-expected revenue.
Mylan NV MYL rose 0.7%. It reported first-quarter earnings that came in below analyst forecasts.
And after the market closes, Roku Inc. ROKU, 21st Century Fox Inc. FOXA and IAC/InterActiveCorp. IAC are slated to report.
What’s on the economic calendar?
The producer-price index rose 0.1% in April, below forecasts. The core PPI was also up 0.1%.
Wholesale inventories numbers from March are scheduled for release at 10 a.m. Atlanta Federal Reserve President Raphael Bostic is expected to give a speech on the economy and policy outlook the River Club in Jacksonville, Fla., at 1:15 p.m.
What are other markets doing?
Asian markets closed mixed, while European stock SXXP benchmarks mainly traded higher. Gold prices GCM8 were down 0.7% at $1,305.30.
Article originally published by Sara Sjolin and Ryan Vlastelica at marketwatch.com